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Friday, October 28, 2016

ONGC net profit up 6%; announces bonus share

MAHARATNA PSU Oil and Natural Gas Corp (ONGC) on October 27 posted 6 per cent rise in its second quarter net profit and announced a bonus share to increase liquidity ahead of government disinvestment. Net profit of Rs 4,974.92 crore in the July-September quarter of the current fiscal was 6.2 percent higher than Rs 4,681.39 crore earning in the same period a year ago. ONGC said in a statement its board approved issue... of bonus shares in the proportion of one new equity share for every two existing ones of Rs 5 each. With all of its about Rs 14,000 crore cash committed in future projects and capital expenditure, the company favoured issuing bonus shares rather than cash dividends as a method of providing income to shareholders. Issuing bonus shares increases the issued share capital of the company, which is then perceived as being bigger than it really is, making it more attractive to investors.
When a PSU issues bonus shares, the price of its existing shares comes down by about the same ratio as the bonus shares that have been issued. So, if the bonus issue is 1:1, which means they are issuing one additional share for each existing share, the market price of the share will roughly halve.
ONGC had in December 2010 issued 1:1 bonus share along with a special dividend of Rs 32 per share and a stock split. At that point, ONGC equity share of Rs 10 face value was split into two of Rs 5 face value. This was done as a precursor to the company's planned follow-on public offer (FPO) in the following year.
The government is mulling divesting at least 5 per cent of its shares through an FPO this fiscal to raise about Rs 12,500 crore.
Prior to that, the company had in 2006 issued a 1:2 bonus issue.
The government holds 68.93 per cent stake in ONGC, the nation's biggest oil and gas explorer and the most profitable public sector unit.
Also, the board approved an interim dividend of Rs 4.5 per equity share for 2016-17.
"The record date for the same has already been fixed on Saturday, the November 5, 2016," the filing said. The Maharatna PSU under the administrative control of the Ministry of Petroleum and Natural Gas, is India's largest oil and gas exploration and production company and produces around 70 percent of India's crude oil (equivalent to around 25 percent of the country's total demand) and around 60 percent of its natural gas. With a market capitalisation of over Rs 2 trillion, ONGC is one of India's most valuable publicly-traded companies. ONGC is ranked as the top energy company in India, fifth in Asia and 21st globally as per Platts Top 250 Global Energy Rankings. It was ranked 21st among global Oil and Gas Operations industry in Forbes Global 2000 list of the World's biggest companies for 2014.